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Economic systems

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Dec. 15th, 2003 | 11:02 pm
mood: curiouscurious

I recently found myself in a socialist study group and learned a bit more about their belief system. I am somewhat sympathetic because of my experiences with the current intellectual property regime and what I've learned of the human rights abuses of various industries.

However none of the large scale experiments in socialism have been particularly successful. For instance the essay why socialism causes pollution points out how most of the soviet socialist countries were exceedingly polluted by their heavy industries.

Then I remembered an insight I had some time ago. That the issues plaguing both transnational capitalism and soviet communism is absentee control. In the case of capitalism it absentee owners, for communism it was an absentee bureaucracy.



irilyth pointed me to some essays by the cato institute on how property rights could help prevent overfishing. My innate reaction to increasing property rights is to argue against increasing property rights. Though I realized that is because I am used to thinking about the problems with intellectual property.

On further reflection property rights if the owner is present at the property can provide a system that encourages sustainable management.

A simple example might be the comparison between a privately owned home and an apartment complex owned by an absentee landlord. For instance the appliances in apartments are frequently old and energy inefficient. Since the landlord isn't responsible for the costs of operating the appliance they have little reason to spend capital on improvements. However in the case of the privately owned home, since the owner would reap the benefits of the improvements both in lowered operating costs and increased value of the property it is much more likely that they would upgrade obsolete appliances.

The example I used on why owning fishing rights might not work is actually a general problem with publicly traded companies. The argument is that if a company doesn't provide a sufficiently high return on investment its share price will decline. If it declines sufficiently for the actual real assets owned by the company to be valued more than the price of the outstanding stock, another company is likely to buy them up and sell off the assets. So a company is faced with the choice between short term destruction from a hostile takeover or long term destruction from exploiting it's resource base faster than it can be replenished.

For instance laying off employees and transferring the work to the remaining workers in the short term can increase profitability. However in the long term the loss of skilled labor increases training costs, increases turnover, reduces morale, and reduces the quality of work. With enough layoffs the company ends up with no employees who are actually capable of producing the companies products.

However the motivation for these unsustainable business practices actually comes from the absentee stockholders, not necessarily the company managers. I recall reading comments from some CEOs that they would like to manage their companies in a less destructive way but the imperative for a high return on investment regardless of cost forces them to comply or be fired and be replaced by someone who is willing to run a company that way.

When the owners of the company work at the company they are far more motivated to consider the long term consequences of their decisions–a poor decision now can translate into a lost job in the future.

In the case of distant bureaucracies causing poor decision making for communism the closest to a functional communist society I can provide would be villages in india. In the cases that I have learned of the women of a village are responsible for tending the nearby forest.

Proper care for the forest provides a number of services for the village such as firewood and watershed management. The women managing this resource understood the services it provided and took care to maintain the forest.

The chipko movement for instance formed to take back local control of tree management from distant entities interested in maximum profit from logging.

In this example we have a solution to the problem of sustainable management being solved by community ownership.

However once again the solution is to bring management of a resource back to those affected by the resource.

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Comments {5}

her other side

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from: saltbox
date: Dec. 16th, 2003 07:22 am (UTC)
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I think you may be oversimplifying things. Here's one example of a concern that property rights don't address. Suppose you have, as you describe in your hypothetical, "local control" of, say, a forest. And, as you describe, these local owners do want to maintain a continuing supply of trees. Sure, that might address the one concern you address in your example: deforestation.

But there's a but. What about endangered species that may live in that area that is in turn under "local control"? Suppose they have no inherent property value, nothing that the owners can buy and sell. And suppose the owners themselves don't care. Then a system in which local control is the norm may well lead to the destruction of those species. And that, I think, would suck.

Another example: A fisher may, if economic rights were distributed properly, try to conserve the fish that he fishes and sells. And so yes, there is the possibility that property rights, when properly distributed, may prevent overfishing. But what about bycatch---what happens when the fishing nets happen to catch other, nontargeted fish? If those nontargeted fish are not economically valuable, then a fisher may have no incentive to use fishing methods that limit that bycatch. And so you may well see the protection of economically valuable species but the depletion of noneconomically valuable species.

I point this out because one of the many litigants we face in court are, indeed, property owners who think "the solution is to bring management of a resource back to those affected by the resource." As such, they want to be able to develop their land into a house for themselves without having to worry about the endangered species that happen to reside on their land. They view government regulations protective of these species as regulations made by "absentee stockholders," and believe that they should be the ones to decide whether these species live or die, not the federal government.

I happen to think this sucks too, and leads to awful effects on the environment. Because while the one resource you're harvesting---fishes, trees, whatever---may indeed be protected, the ones with little economic value---an endangered plant with no-(yet)-known-pharmaceutical-value, the endangered moth, the endangered toad, the endangered arachnid---may not.

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Diane Trout

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from: alienghic
date: Dec. 16th, 2003 01:32 pm (UTC)
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I probably was simplyfing, it's really easy to do. (Also I'm learning how arguments from anecdotal evidence are pretty poor).

As I was falling asleep, I was contemplating how local control also has issues. Taken to the extreme local control devolves to anarchism where each although each individual is theoretically free to do whatever they want the system doesn't provide a method to resolve conflicts.

What about an alternative where instead of pure "local control", those impacted by a decision need to be present to make the decision?

The decision what color to paint the inside of my house would be left to me whereas in trying to regulate what I can put into river has to be done between at least everyone downstream and me.

Though I do think your other comment is right, no ideological technique is fullproof, each one has its own limitations.

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her other side

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from: saltbox
date: Dec. 17th, 2003 07:50 am (UTC)
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What about an alternative where instead of pure "local control", those impacted by a decision need to be present to make the decision?

The problem, then, becomes how to define "those impacted by a decision". I mention this particular problem because again, it's what I face in litigation a lot too. If someone with an interest in seeing an endangered woodpecker survive has enough interest to participate in decisionmaking, then why doesn't a developer with an interest in seeing his housing project survive? I, like you, would rather the decision be more swayed by endangered-woodpecket-enthusiast's interests than the developer's, but what principled way do we use to prioritize one over the other?

Or, to pick a less environment v. "anti"-environment situation---suppose you have people who really like one species, and this species needs dense forest to thrive. And you have other people who like other species, and these species need less dense forest to thrive. How to decide on a forest-maintenance plan in this instance? This actually happened in a case of mine.

My point is that proponents of one methodology over another---and I find the property-rights enthusiasts to be the most egregious in this---greatly oversimplify matters in order to claim that their methodology is "best". In general, that annoys me, because it seems that they overlook the ends (environmental protection) in favor of their chosen means.

Another thing I wanted to point out is that a lot of times people complain about lack of opportunities for participation when it comes to environmental decisionmaking. Which is true in my view---there can always be more opportunities for participation. But it twists my panties that people don't often take participation opportunities they already have. Take the National Environmental Policy Act, for instance. It mandates that for every major federal action, the government must study the environmental impacts, publish them, and provide a certain time period for public comment. (I'm omitting the details here, and just trying to provide the broader overview.) And a lot of times, not many people comment.

This is not to say that no one comments to provide their views. The Sierra Club and other environmental groups comment. And big corporations comment. But few, few private citizens comment. Given this great degree of apathy, why would an alternative where "those impacted by a decision need to be present to make [a] decision" be successful? More likely that under this system, no decisionmaking---either for or against the environment, or even muddledly in the middle---would end up occuring, because so few stakeholders would bother to participate.

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the Edward

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from: thedward
date: Dec. 16th, 2003 07:51 am (UTC)
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Only vaguely related... but I was wondering if you had come across any of the writings about Participatory Economics? Basically a non-market, decentralized alternative to capitalism.

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Diane Trout

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from: alienghic
date: Dec. 16th, 2003 02:05 pm (UTC)
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No I hadn't heard about it before. Sounds really interesting.

*sigh* so many books to read...

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